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What the Mega Deals Really Mean

Written by: Antoine Gara02/16/13 - 9:44 AM EST

Tickers in this article:
BRK.A BRK.B CMCSA CPB DELL GE HNZ HSY

NEW YORK ( TheStreet) -- This just in: The year so far has brought with it the return of the mega deal, with $10 billion-plus transactions for the likes of Heinz(HNZ) , Dell(DELL) , American Airlines (AMRPQ) , General Electric's (GE) stake in NBCUniversal and Virgin Media (VMED) .

While the mergers, acquisitions and leveraged buyouts are of a size rarely seen since the credit bubble burst in 2007, it might be wise for investors to consider calls for a mega-merger frenzy as premature.

In fact, that's exactly what some top insiders in the M&A and private equity world are saying.

Mark Gallogly, head of private equity firm Centerbridge Partners , noted on Friday that such large acquisitions may be the exception rather than the rule, even if he expects that Wall Street is in the early stage of a post-crisis deal-making renaissance.

Gallogly notes that in Dell's case, the more than $5 billion in equity that company founder Michael Dell is contributing to the buyout certainly isn't the norm. Buffett's Heinz ketchup acquisition and a proposed blockbuster merger to pull American Airlines from bankruptcy also might not be symbolic of wider trends.

Still, the Centerbridge head and former senior managing director at the Blackstone Group said firms like his can expect an improving deals market ahead.

Even as some traders and analysts scour Wall Street for the next mega deal, investors ought to consider what Gallogly's comments might imply.

Notably, it could indicate further evidence of a consistent rise in valuations, improving executive and investor confidence, and a slow psychological turn to animal spirits from the crippling fear brought by the financial crisis.

In other words, status quo.

Consider that in the absence of frenzied periods of mega deals in 2012, overall M&A activity around the world ended the year roughly flat from 2011 levels, according to data provider Dealogic.

While M&A globally came in at about $2.7 trillion -- below 2008 levels in excess of $3 trillion -- the number of deals done exceeded levels from four years ago.

Even in the absence of blockbuster mergers like Heinz or Dell, private equity firms such as Carlyle Group (CG) and banks including Goldman Sachs (GS) have been hard at work in recent months.

Meanwhile, a surge in 2013 deal making may not be such an aberration from the previous year. Dealogic data show that nearly $1 trillion in transactions in the fourth quarter of 2012 was the highest quarterly total since the same period five years earlier.